Havens lose lustre as North Korea missile test fears subside

What you need to know

Overview

A sense of relief spread across markets in Asia Pacific as fears that Pyongyang would conduct a missile test over the weekend proved unfounded.

Hot topic

Investors had been bracing for North Korea to test a missile to mark the country’s founding day but Pyongyang opted instead to hold a celebration. The US has called for a UN vote on Monday for new sanctions on Pyongyang that would ban sales of oil and natural gas to North Korea.

Perceived haven assets weakened, with gold shedding $9.55 to $1,336.60 an ounce, the Japanese yen dropped 0.6 per cent to ¥108.50 per dollar while the Swiss franc slid 0.6 per cent against the dollar at SFr0.9498.

Equities

The relief also was evident in regional equities markets. South Korea’s Kospi Composite gained 1 per cent while Japan’s Topix climbed 1.4 per cent, on course for its best day since early June.

Australia’s S&P/ASX was up 0.6 per cent, shrugging off a 1.4 per cent fall for the materials sector in response to a fall in commodities prices. The country’s iron ore producers were among the worst performers on the benchmark index after the price of steel making ingredient fell on Friday. BHP Billiton was down as much as 2.7 per cent, Rio Tinto lost as much as 2.6 per cent, and Fortescue Metals Group was off as much as 3.2 per cent.

Hong Kong’s Hang Seng Index was up 1 per cent with all sectors rising and financials gaining 1.1 per cent.

Forex

The dollar index, a measure of the US currency against a weighted basket of peers, rose 0.3 per cent as concerns that Hurricane Irma would hit Florida with the force of a Category 5 hurricane dissipated after it made landfall as a Category 4 storm.

The renminbi weakened against the dollar following reports China’s central bank had eased restrictions on shorting the currency. The offshore renminbi was 0.4 per cent weaker at Rmb6.5183 per dollar while the renminbi’s onshore rate was down 0.2 per cent at Rmb6.5082.

Fixed income

The 10-year US Treasury yield, which moves inverse to price, was up 5.2 basis points at 2.091 per cent, after hitting a nine-month low of 2.06 per cent on Friday.

Commodities

Brent crude oil, the international benchmark, rose 0.5 per cent to $54.02 a barrel after falling 1.3 per cent on Friday on concerns Hurricane Irma would hit demand. West Texas Intermediate, the US marker, was 0.8 per cent higher at $47.84 a barrel.

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